Microeconomics

A penny for your thoughts…

“Monetization” of the web is the holy grail.

Content is migrating to the web far more rapidly than advertising dollars. As well, newspapers, magazines and TV stations are finite, and the percentage of advertising dollars that these institutions were able to garner was considerable on a per spot basis.

But take 10 percent of the conventional old media spend and spread it over the millions of potential sites on the web, and any amount of money suddenly seems insignificant. Like water poured into the Sahara Desert, one is tempted to ask, ‘where did the revenue go’?

It might seem from first glance that the problem of monetizing the web is fundamentally insoluble. Websites for newspapers or local TV stations will never generate the kind of revenues that physical dailies or local tv stations once did.

That might be right. But it also might not matter.

The web offers not just another platform for distribution of product, but rather an entirely new calculus for how an online media company can be run. By its very nature, it changes the construct of most media businesses. Migrate your newspaper to the web completely and you suddenly lose the cost of ink, paper, presses, pressmen, delivery trucks, distribution and paperboys. Tell your writers to work from home and you can lose the building, the desks, the lights, the cleaning services and most of the management as well.

Cut all those costs, and suddenly your ad based web revenue can look pretty good in comparison.

Its the overhead that is killing you.

Lose it. You don’t need it.

For the past year in Washington, DC, we have been running a small local Television station, but at a tiny fraction of the cost of a conventional station. All reporters are self contained – they cut all their pieces on their own laptops and are free to work at home or in the field. The entire office is one conference room. On site management is almost non-existent. And it works.

The web allows you not only to distribute your product to 2 billion homes daily for free; it also allows you to cut overhead and management to the bone. And what is left behind can go to those who create the content – which seems only fair. The ad revenue might be pennies on the dollar, but after all, isn’t that the percentage of current income that writers or shooters are already taking home?

This is not going to happen overnight, but the seeds of the future are cast within the DNA of the Internet. The new New York Times Building might just prove to be a massive monument to anachronism.

7 responses to “Microeconomics

  1. anyone who has ever shopped at tiffany’s knows their pricing policy- if it doesn’t sell at $200, raise it to $300.

    “the problem”, as ! see it, with the net is the pricing is far too low.

    part of me thinks this was somewhat deliberate on the part of tv and newspapers early on because they know how tiffany works. if they offered the web at a low rate (or even added value) it left the impression that their “other” product was much better because it cost soooo much more.

    take a $7 bottle of wine that you like and pour some for casual friends and tell them it cost $75… watch, they’ll love it!

    but tell them it was $7 and watch the glasses sit nearly untouched.

  2. take a $7 bottle of wine that you like and pour some for casual friends and tell them it cost $75… watch, they’ll love it!

    but tell them it was $7 and watch the glasses sit nearly untouched.

    Living in Pinot country myself, this analogy is a sad commentary on those who are truly misinformed. I purposefully try to find what would be considered budget wines for the purpose of finding hidden gems in a bottle. More times than not, I do end up finding them. I’ve had $65 wines that I wouldn’t put in my pasta sauce let alone drink, and I’ve found $10 wines that should have sold for 5 times the price I bought them at.

    From my experience, more times than not, high price doesn’t guarantee real world value – only a drain on ones pocket book.

    The unspoken assumption is that by buying (an expensive) product, through some magical act of appropriation you become like them (exclusive), or rather the surface image of them. And so in many cases you are not buying a product but an “identity enhancer”. Designer labels are primarily collective identities that you buy into. They are expensive and therefore “exclusive”. If everybody could buy them, they would lose their psychological value and all you would be left with would be their material value, which likely amounts to a fraction of what you paid.

    – Eckhart Tolle’ – page 36 of A New Earth

  3. funny you should mention “pinot”.

    here’s a $5 bottle that just reading the label is worth twice that.

    “pinot evil” (you can google it for results that show the label)

    while there are a wide variety of opinions about the product inside, the label will stick with you.

    check ’em out.

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  6. My website is going to be built by the likes of New Media. This one was thrown together by a 15 year old, for fun. In affect, I will be doing the first online-live-interactive-virtual reality race horse owners. Whilst many people in various equine disciplines can’t wait for our premiere that will also be taking videoconferencing into the equine arena, there remains fear from the equine professional comunity. One part is, the animal rights movement that have race trainers frigid with fear but also now the sport horse world. Second, the internet equine highway will eliminate the ‘statis quo’, of the old power structure that every rider/trainer has had to work within for literally hundreds of years.
    I’m embrassing this technology because of the later two reasons. My background with horses has strength from real horsemanship based on clean racing long before animal rights were ever heard of. Also, finally having the opportunity of training ethically and with integrity without waiting for a Paul Mellon owner! A virtual race owner can have the experience, behind the scenes information and physical viewing but not have the responsibility and/or finances of today’s industry demands politically and economically. In turn giving me, the trainer, what a trainer should have…….freedom to cultivate their own opinions on how and when to race the athlete. Allowing the painter to paint, as apposed to “number painting”.
    In conclusion, my point is, the web doesn’t only allow your product distribution to go out world wide, but also it creates a new audience geographically. In my case (the horse) that can be noticed (wether agreed with or not) ahence not controlled or manipulated by the corporate ‘walmart’ owner. So far the politically established horseman that are the most excitted, are not from the U.S.
    With the above in mind, this market doesn’t have the same problems that Joost, Video on Demand have with targeting their market place for advertising. The content integrity is also created by the individual trainers horsemanship and hospitality services. The ‘old’ club house networking will be aliminated and creates a ‘real’ capitalism business focus on the horse rather than a ‘whose who’ cocktail hour!
    The same trainers that laughed at me for racing clean, are the same ones that are terrified of any camera, let alone news on the internet.
    I am hoping the advertising pricing becomes more clear for a pay per click interactive web site. The blogging, instant messaging and overall daily training activities present huge possibilities for such a web site advert spots.

  7. My point is, the web doesn’t only allow your product distribution to go out world wide, but also it creates a new audience geographically. In my case (the horse) that can be noticed (agreed with or not) hence, not controlled or manipulated by the corporate ‘walmart’ race owner. So far the politically established horseman that are the most excitted, are not from the U.S.
    With the above in mind, this market doesn’t have the same problems that Joost, Video on Demand have with targeting their market place for advertising. The content integrity is also created by the individual trainers horsemanship and hospitality services. The ‘old’ club house networking will be aliminated and creates a ‘real’ capitalism business focus on the horse rather than a ‘whose who’ cocktail hour!
    The same trainers that laughed at me for racing clean, are the same ones that are terrified of any camera, let alone news on the internet.
    I am hoping the advertising pricing becomes more clear for a pay per click interactive web site. The blogging, instant messaging and overall daily training activities present huge possibilities for such a web site advert spots.

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